New Zealand world first for carbon tax

New Zealand has become the first country in the world to introduce a direct carbon tax to address the issues of global warming.

International first: the New Zealand government will raise millions of dollars to combat global warming and reduce fossil fuel dependency by introducing a national carbon tax

As of April 2007 the average New Zealand household will pay about NZ$4 per week extra across electricity, petrol and other fuels, Pete Hodgson, Convenor of the Ministerial Group on Climate Change told the Parliament.

He said the tax is likely to add about 6% to household energy prices and 9% for most businesses, but would help the economy in the long run. The government estimates the tax will raise about NZ$360 million a year, but stressed that this would be recycled back into the economy through tax changes elsewhere.

Full details of the revenue recycling programme will be unveiled in the budget in two weeks time. The tax will most affect heavy energy users as it will add roughly one cent per unit of electricity.

"This initiative is not just about caring for the environment. It also represents prudent economic management - anticipating change and making provision now to position the New Zealand economy to best advantage," Mr Hodgson said. "Tackling climate change is a major global challenge. The New Zealand government is proud to be part of the gathering global effort that is taking the first step."

The tax was soon criticised by industry groups and conservationists alike for being too harsh and too lax respectively.

Terence Currie, Chairman of the Major Electricity Users Group, said the tax would raise average wholesale electricity prices by 20%: "As energy intensive industries are already suffering from a lack of security of supply plus price increases which have eroded our manufacturing sectors international competitiveness, today's announcements will further reduce confidence in New Zealand as a place to invest in."

Greenpeace, although welcoming the tax as a "baby-step", said it would not prevent new coal fired power stations being built.

"Might River Power is utterly undaunted by the threat of a carbon tax and is still proceeding with its plans to build New Zealand's first major coal-fired power station for 25 years. So, now we're looking at an energy future powered by coal with nothing to stop it," said climate campaigner Vanessa Atkinson.

"New Zealand needs real policies to reduce our reliance on fossil fuels, which should include a sustainable energy strategy, policies to encourage renewable energy and energy efficiency as well as national standards on carbon dioxide emissions."

The carbon tax specifically excludes the methane and nitrous oxide gases from the agriculture sector, despite livestock flatulence being responsible for around half of New Zealand's greenhouse gas emissions. The idea was floated in 2003 but dismissed after farmers labelled it as a "fart tax."